The X Internet - Massachusetts Institute of Technology

T H E F O R R E S T E R R E P O R TM A Y 2 0 0 1

The X Internet

©2001, Forrester Research, Inc. All rights reserved. Forrester, Forrester eResearch, eBusiness Voyage, Internet AdWatch, Netquity,PowerRankings, Technographics, TechRankings, and Voyage Advisor are trademarks of Forrester Research, Inc. All other trademarks arethe property of their respective companies. Forrester clients may make one attributed copy or slide of each figure contained herein.Additional reproduction is strictly prohibited. For additional reproduction rights and usage information, go to www.forrester.com.Information is based on best available resources. Opinions reflect judgment at the time and are subject to change.

M AY 2 0 0 1

The X Internet

The Web’s days are numbered. So what’s next? The X

Internet, which boosts online users’ quality of experience

and accelerates the number of connected devices.

M A R K E T O V E RV I E W• The Web is fading.• The Internet still ignores most of the real world.

A N A LY S I S• An executable Internet will create new, more compelling

experiences for people.• An extended Internet connects users with the real world.

A C T I O N• Don’t get stuck on the Web.• Start wiring for wireless.

W H AT I T M E A N S• Firms will tap into the open source movement.• X Internet devices will number 14 billion in 2010.

R E L AT E D M AT E R I A L• Online spreadsheet underlying the X Internet sizing

forecast.

G R A P E V I N E

E N D N OT E S20

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By Carl D. Howe

With George F. Colony

Bill Doyle

Christopher Voce

Rebecca Shuman

Headquarters

Forrester Research, Inc.

400 Technology Square

Cambridge, MA 02139 USA

+ 1 617/613-6000

Fax: +1 617/613-5000

www.forrester.com

The Forrester Report

M A R K E T O V E R V I E W

Web-Centric Thinking Hinders The Internet

People are confused: Many think the Web is the Internet because the Web

has been so successful. But the Web and the Internet are different -- and

the Web is only one step in the growth of the Internet.

THE MAINSTREAM INTERNETThe Internet has come a long way from its roots as a government-sponsored,communications research project. As the year 2001 dawned, the Internet hosted morethan 100 million computers and more than 400 million users worldwide.1 And why not?Look at what the Internet has provided to its users:

• Global reach. The Internet today connects users and servers in every country inthe world.

• Access to most companies. All US corporations with more than 1,000 employeeshave some type of Internet connection today.

• An abundance of content. Internet users today have access to everything frompictures of Egyptian artifacts to data from the International Space Station.

The Internet’s Killer App -- The WebA long string of Internet applications has fueled the Internet’s boom (see Figure 1).Businesses and consumers first took notice of the Internet after Marc Andreesen andNetscape put a point-and-click interface on the World Wide Web protocols that TimBerners-Lee invented in 1989. With a user interface that schoolchildren and CEOscould understand, the Internet finally got attention outside the realm of computer geeks. The results:

• More than 1 billion Web pages. Today, researchers at the University ofCalifornia, Berkeley, estimate that there are about 4 billion static Web pages -- and that’s just the surface. When we look at Internet information contained indatabases accessible via the Web, firms like BrightPlanet.com estimate that thisdynamic Web content amounts to more than 600 billion pages or 7.5 petabytes of information.

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MAY 2001 ©2001 Forrester Research, Inc. Reproduction Prohibited

The X InternetM A R K E T O V E R V I E W

Figure 1 The Web Is Just The Latest Internet Application

• Booming eCommerce. In 2000, US eCommerce exceeded $480 billion -- and it’sprojected to grow to more than $3.1 trillion in 2004 (see the April 18, 2000 ForresterBrief “Global eCommerce Approaches Hypergrowth”).2 This phenomenon is notconfined to the US -- global eCommerce will hit hypergrowth this year, breakingthe $1.2 trillion mark and reaching $6.8 trillion in 2004.3

• A thriving job market. A recent study showed that the Internet is responsible for more than 3 million jobs today -- that’s 60,000 more jobs than the insuranceindustry and twice as many as real estate.4

BUT THE WEB IS FADING FASTThe 1990s euphoria built on an always-expanding Web got a reality check in 2000.Despite booming Internet use, today’s New Economy still pales next to the size and scopeof the real world (see Figure 2).5 Now that the novelty of reading People online has faded,business executives and consumers are returning to reading magazines, watching TV, andseeing plays. Why? Because they tire of the Web’s:

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©2001 Forrester Research, Inc. Reproduction Prohibited MAY 2001


Source: Forrester Research, Inc.

1970 1980 1990 2000

Filetransfer

Remoteterminals

(telnet) Email Web ???100%

0%

Percentageof Internet

users

Figure 2 The Gap Between The Internet And The Real World

• Unsatisfying sites. Today’s Web sites create terrible user experiences. Of 117 B2Csites that Forrester reviewed in 1999 and 2000, the average user-experience scorereceived was -3 on a scale of -50 to +50 -- where +25 represents a passing grade(see the December 2000 Forrester Report “Scenario Design”).6 And B2B sites areno better -- of 30 B2B sites reviewed by Forrester, the average score received was -9(see the December 1999 Forrester Report “Why Most B-To-B Sites Fail”).7

• Content-free content. When Forrester surveyed more than 5,000 onlineconsumers regarding online content, we found there was no type that even 10% of our interviewees were willing to pay for (see the December 2000 ForresterReport “The Content Site Turnaround”).8 Across all content types, only a quarter of respondents said that online content was “good” or “very good.” The bottomline: Today’s Web isn’t good enough to pull money out of consumers’ pockets.

• Flat experiences. Sock puppets and Super Bowl ads paid for with venture capitalcouldn’t save the likes of Pets.com and eToys. Why? Because once the novelty of online shopping wore off, most Internet retailers couldn’t offer a rich enoughexperience to compete against the familiar experience of real-world shopping -- as the nearly 25,000 employees laid off by US dot-coms in the first two months of 2001 will attest.9

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Automobiles

Telephones

Electronic chips

Internetcomputers

Internetusers

93 million

407 million

663 million

1.5 billion

30 billion

The Root Problems Of Today’s InternetThe Internet still retains seeds of ongoing, sustained growth. But for it to reach thispotential, the Net must overcome three root problems:

• It’s dumb. Static Web pages presenting news, sports, and weather hardly improvethe same content presented on paper -- nor do they take advantage of thepowerful computing systems delivering them.

• It’s boring. With the bulk of Internet use coming from fetching static Web pages,today’s Internet experience is more like reading in a dusty library than basking in thebirth of a new medium.

• It’s isolated. Today’s Internet is so remote from the real world that the media callsit by a different name -- cyberspace.

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A N A L Y S I S

The X Internet Will Overtake Today’s Web

The Web was about connecting people to computers through browsers.

But two new waves of innovation will eclipse the Web: an executable Net

that greatly improves the online experience, and an extended Net that

connects the real world. The result? The Internet moves to a second

round of expansion.

THE X INTERNET LOOKS BEYOND THE WEBThe Web boom is dead, and users know it (see the Forrester My View “X Internet”).10

But Forrester sees two waves of Internet innovation that will supplant today’s dead Weband grow the Internet to billions of devices (see Figure 3). The two waves we see are:

• An executable Net that supplants today’s Web. Code moved to user PCs andother devices will captivate people in ways that static Web pages never could.

• An extended Net that connects to the real world. Smart devices will push thescale of the Internet far beyond today’s PC-based Net.

These new applications will drive change in three areas:

• How applications get built. The executable and extended Internet will rely onnew combinations of hardware and software.

• How people use the Net. These systems will change how users view the Internetand what they expect of it.

• How firms do business. These changes will drive invention -- and the creation ofnew companies to profit from those inventions.

THE EXECUTABLE INTERNET PUTS INTELLIGENCE NEAR USERSForrester defines this first stage of the X Internet as:

Intelligent applications that execute code near the user to create rich, engagingconversations via the Net.

The Web brought users pages to read. The executable Internet will deliver interactiveexperiences.

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The X InternetA N A L Y S I S

Figure 3 Two Waves Of Innovation Will Supplant Today’s Web 7




The Web

Dumb browsers

Webservices

The X Internet

Smartservices

Smart devices

ExecutableInternet

Smart sensors

Numberof devices

Focus

Killer app

Data

Model

Connections

Time frame

The Web

Millions

Browsers

Web, IM, eCommerce

Server-centric

User-driven

1993 to 2001

HTML, XML

ExecutableInternet

Hundreds of millions

User-focused software

Responsiveexperiences

Peer-to-peer

Opportunistic

2001 onward

Executablesand XML

ExtendedInternet

Billions

Devices

Real-timebusiness apps

Device-centric

Opportunistic

2005 onward

Environmentaldata

ExtendedInternet

Imagine that you are building a house (see Figure 4). The Web would deliver documentsto you that tell you how to build the house. Ask about framing a window, and you get anarticle telling you how to do that. But when you move on to installing a faucet, you haveto ask for and read a different article about how to install plumbing.

Now imagine building that same house, but this time with the executable Internet. Whenyou want to frame a window, a carpenter shows you a level, a hammer, and a carpenter’ssquare, and guides you step by step through the process. Instead of reading a book, youhave a conversation about the work you’re trying to do. When you move on to installinga faucet, the carpenter disappears, and a plumber appears with his tools. By having anintelligent conversation instead of reading a book, you can build your house faster, withhigher quality and precision.

Executable Internet Applications Get Built In Four PiecesThe executable Internet isn’t completely new -- it’s a specific mix of software and standardsavailable today. In fact, users can see glimpses of the executable Internet in applicationslike Napster or SmartMoney.com’s Map of the Market. But complete executable Internetapps will consist of four pieces:

1) Smart code. Software like Java allows users to download code from the Net andrun it locally without security fears. Executable Internet apps will use downloadedcode to enhance the user experience with pop-up menus, pick lists, graphics, andsimple calculations. A sales manager at autodealer giant AutoNation might run anexecutable Internet application from Bank of America locally to evaluate whethershe should extend her firm’s credit line to finance its growing auto inventory.

2) Data conversations. Code downloaded to user PCs will talk back and forth withservices in the network using self-describing data in the eXtensible MarkupLanguage (XML) standard. The benefit? The user’s PC can talk with any othercomputer on the Net, regardless of whether it’s a PC or a mainframe. When theAutoNation sales manager tries to forecast her credit needs for the upcoming year,her executable Internet app can fetch her dealers’ order histories from GeneralMotor’s IBM mainframe and Ford Motor Company’s Sun Microsystems server.

3) Service locators. Just as house builders might use a person-to-person referralsystem to find a plumber, executable Internet apps use online location services likesearch engines and peer-to-peer referrals to find new Net services. A locationservice at GM helps the AutoNation sales manager find GM services that mightaffect her planning process for the year.

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Figure 4 The Web Versus The Executable Internet

4) Services in the network. Net-based services deliver new content -- and newexecutables -- to users when they need it. Once our sales manager discovers GM’sservices, she can use GM’s executable sales modeling application to see how itsnew pricing and incentives will affect her forecast.

People Use The Executable Internet For Better ExperiencesForrester predicts that the executable Internet will become the dominant way usersinteract with the Net by 2005. Why? Because downloadable tools that assist users and allow Internet conversations will:

• Eliminate the worldwide wait. An Amazon.com customer who wants to buy fourCDs will no longer have to wait for eight pages of text and graphics to flow to hisscreen. Instead, users can employ the same drag-and-drop skills they learned onthe Windows desktop -- and take seconds rather than minutes.

• Create experiences comparable to video games and TV. User PCs will nolonger sit idle while pictures download from remote servers. Technologies likeCurl’s new executable content language will generate fluid animations on the user’smachine -- allowing a buyer to navigate a virtual marketplace like Enron’s energytrading market as easily as playing a game of Doom.

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The Web

“How do I frame a window?”

“How do I frame a window?”

How to frame a window

The executableInternet

Two-way conversation about framing a window

Tools to frame a window

Figure 5 X Internet Vendors

• Simplify users’ technology burdens. Because it is downloaded as needed,executable Internet code can be updated and managed by professionals instead ofrelying on users to install it. So when Charles Schwab & Co. wants to introduce a new version of its executable online trading system, it just updates the server --and every user gets the new version the next time she uses the service.

The Winners: Our First Take It’s too early to pick the sure winners and losers in the executable Internet. But our betsride on vendors that can market successfully to software developers (see Figure 5). Ourpicks follow the four components of executable Internet applications:

• Smart code: Sun and Hewlett-Packard. The only cross-platform, executableenvironment in place today is Java. As the executable Internet takes off, millions of Java Virtual Machines like Sun’s HotSpot VM and HP’s chaiVM will pop up.Why not Windows executables? Some executable Internet apps will be piloted as Windows components -- but viruses and Trojan Horse software will drivedevelopers to systems that have built-in security models like Java has.

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Executable Internet vendors

Extended Internet vendors

Hewlett-Packard, Microsoft, Sun Microsystems Java and Windows execution platforms

Altio, Consilient, Droplet, Eazel, Fourbit Group, Microsoft, NetGratus, Zaplet

XML-based executable development platforms

Curl Executable media language

IBM, Microsoft, Ariba Machine-to-machine services locators

American International Group, Dun & Bradstreet, eCredit.com

Business services in the network

Dallas Semiconductor, DPL Group,Hewlett-Packard, Internet Telemetry,

Medtronic, Motorola, NetBotzInternet-connected sensors

NetAcquire, WhereNet, Echelon, Metricom Networks for collecting sensor data

iVita, OnStar, Networkcar Extended Net applications and services

What they provide

What they provide

• Data conversations: startups like Altio, Curl, Droplet, and Eazel. These firms have created drag-and-drop tools that can turn data conversations into userexperiences. Each of these firms has specific features, but Forrester expects thesuccessful ones to be bought by today’s software giants like IBM, iPlanet, Microsoft,and Oracle. Why? Because these big companies already have relationships withdevelopers -- and the deep pockets needed to market to them.

• Service locators: vertical industry eMarketplaces. IBM, Microsoft, and Aribahave already launched directories to locate online business services using an emergingstandard called UDDI. But running business directories isn’t the core business ofthese technology companies. Instead, Forrester sees this function becoming anindustry-specific service run by vertical hubs like e2open or CheMatch.com as theeMarketplace business consolidates (see the August 2000 Forrester Report “TheeMarketplace Shakeout”).11

• Services in the network: businesses specializing in Internet transactions.Companies like Dun & Bradstreet, eCredit.com, and American InternationalGroup are already creating business-based services like real-time financing andcredit that are priced per transaction -- and they’ll work better with executableInternet technology. Expect downloadable apps that mirror D&B’s Risk AssessmentManager or ClearCross’ Landed Cost solution to spark business use of executableInternet apps -- and to convince firms that they don’t have to buy software to usethese services.

THE EXTENDED INTERNET CONNECTS THE REAL WORLDThe X Internet is not just executable -- it’s also extended. Forrester defines the extendedInternet as:

Internet devices and applications that sense, analyze, and control the real world.

Let’s return to building our house. In New England, we try not to leave our housesunattended in the winter. Why? Because if the furnace ever goes out, the house freezes, the water pipes burst, and the house floods when the ice melts.

But what if houses had Internet-connected thermostats? When the weather gets cold,homeowners could check and adjust their house temperatures from thousands of milesaway any time they were on the Internet. Both homeowners’ and service providers’computers could monitor house temperatures and optimize comfort and energy use.Some electric utilities might even offer lower rates to Internet-controlled homes if theyget permission to adjust the home energy consumption during peak usage periods.

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Figure 6 The X Internet Connects More Than People And Computers

These capabilities aren’t just an early adopter dream -- the same economics that drovechips into most everyday devices will also extend the Internet to them (see Figure 6).

Extended Internet Applications Exploit Embedded ChipsEver-cheaper integrated circuits will drive Internet connections into everyday devices by2005 -- $1 chips will have all the power and networking capabilities of a circa-1990 PC.But once the executable Internet has connected users with Net-based services, firms willuse the same technology to talk with networked chips. These chips will have:

• Silicon eyes and hands. Chip makers like Analog Devices, Dallas Semiconductor,and Texas Instruments already make miniature sensors, microelectromechanicalsystems (MEMS), and actuators that work via the Internet. By 2005, manufacturerswill build MEMS into most electronic devices. Why? Because these tiny chips will let Internet users locate, measure, and adjust everything from fuel injectors to earthmovers -- and do it from across the room or across the country.

• Opportunistic communications. Collecting information from these cheapsensors won’t require a $19.95 per month wire from the phone company. Instead,data will be collected via wireless Ethernet links or piggyback on existing connections

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Automobiles

Telephones

Electronic chips

Internetcomputers

Internetusers

Today’sInternet

The XInternet

like power lines and cellular links. Already, companies like Cambridge Silicon Radiomake chips that speak both Ethernet and Bluetooth wireless protocols. By 2005,these chips will cost only a few dollars.

• Self-configuring networks. These new Internet sensors will locate services just asthe executable Internet did. Technologies like Sun’s Jini and Microsoft’s UniversalPlug and Play will remove the need for users to do anything to connect these chipsto the network. So when BP Amoco installs a new Internet-enabled gasoline pumpat a filling station, it will start logging maintenance information to the station andto BP Amoco operations without the owner lifting a finger.

Business Applications Will Dominate Extended Internet UseThe big users of the extended Internet will be businesses, not people. Why? Becausecorporations have the capital necessary for extended Internet deployments -- and willspend that capital if they can forecast a large return on their investment. Some examples:

• Extended Internet apps will allow executives to optimize assets. Companieslike iVita already have software that helps firms optimize capital assets based onwhere they are -- all without people having to type in data. For example, radio ID tags allow hospitals to track high-value assets like infusion pumps. iVita’s appcan alert the hospital’s CFO if 50% of those pumps are unavailable simply becausethey’re waiting to be cleaned -- and save thousands of dollars by not buyingadditional, unneeded pumps.

• Suppliers will instrument customer sites to boost sales. Motorola is buildingagricultural sensors that can collect data on soil properties like moisture and pH.But it will be firms like Dupont that put them on farms. Why? Because withcontinuous monitoring, Dupont can ensure a near-perfect corn crop to farmersusing microcustomized fertilizer -- and charge a higher price for that service (see the January 2001 Forrester Report “Custom Chemicals Materialize”).12

• Telematics will collect mobile data beyond cars. More than 1 million cars todayalready provide users with enhanced safety, navigation, and entertainment servicesusing telematics (see the November 2000 Forrester Report “Cars Get Wired”).13

Companies like OnStar and Networkcar will start aggregating this data to createentirely new applications. For example, Infotrafic’s traffic monitoring service will buythe aggregated, real-time feed from OnStar systems to provide up-to-the-minutetraffic information -- all without adding a single traffic helicopter.

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Who Will Dominate The Extended Internet? It’s A Free-For-AllWhere the executable Internet was largely about software companies, the extendedInternet will create more opportunities around hardware, data collection, and analysis.Forrester sees the extended Internet businesses getting started with:

• Instrument builders like HP, Motorola, GARMIN, and NetBotz. Theseinnovators will create X-Internet smart devices that gather up real-world data like soil conditions, GPS locations, and data center temperatures. Firms will jump into these businesses when they realize that the volumes of devices they can sell will range easily into the billions.

• Sensor-network owners like OnStar and Networkcar. OnStar already has a million cars outfitted with its mobile phone and location sensor systems.NetworkCar is attaching devices to post-1996 US automobile engines through the emissions-control interface -- and using that data to collect maintenanceinformation. Firms like these -- which deploy and operate sensors -- will be theMicrosoft monopolies of the extended Internet. Why? Because their sensordeployments will create big barriers to entry for competitors -- and their revenuestreams will grow with their always-increasing reach.

• Data farmers like SAS Institute and Tilion. These companies collect, sift,grade, and organize the data that comes from X Internet devices -- then sell it to other firms. SAS will sell its analytical tools to the sensor network operators in order to understand the real-world data gathered through the extended Internet.Tilion, which has its roots in the Web analytics business, will sell analytics as a service. All analytical companies will thrive by preventing companies fromdrowning in the data that the X Internet provides -- and help them understandwhat it means.

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A C T I O NThe evolution of the X Internet will usher in a new phase of technology change. Thegood news? Most firms already have their Internet connections. The bad news? Thesechanges will require deeper knowledge of technology than the Web did.

Don’t try to pick X Internet winners this early.Many companies are already jumping on technologies like Microsoft’s .NET,assuming that an early decision will help them win in the X Internet. Don’t --it’s too soon in the X Internet’s evolution. Instead, invest your time and moneyin X Internet experiments that yield business value today. For example, youmight want to add an XML interface to your customer data to ease partner dataaccess today -- and prepare for executable apps to mine that data tomorrow.

Start looking beyond the Web.Most firms are still trying to satisfy customers with Web HTML and animatedGIFs. But delighting customers in the executable Internet will require betteruser interfaces. Start using Scenario Design -- a methodology through which youidentify your users, discover their goals, and observe how they can achieve thosegoals. Then prototype some executable code that makes those goals easier toreach.14 You’ll satisfy more customers and get a jump on the executable Internet.

Start using wireless networks.While wireless extended Internet systems will be cheap, wireless carrier feeswon’t be. To make internal extended Internet apps less expensive to deploy, startpiggybacking 802.11b wireless Ethernet from companies like 3Com or Lucentonto your corporate network. Corporate road warriors can get started by usingthe wireless network now for email and intranet apps -- then, when you want to roll out an extended Internet app like production or supply chain monitoring,the network will already be in place.

Identify high-value extended opportunities.Look for places within the corporation where sensing the physical world in thebusiness would decrease costs or increase revenue. For example, Michelin andBridgestone have already started building smart tires with embedded processorsthat measure tire pressure, heat, and other factors. With early detection ofexcessive wear conditions, commercial operators can change out tires beforethey blow -- and the tire companies will sell more tires.

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The X InternetA C T I O N

W H A T I T M E A N SThe Web’s decline amid the rise of the executable Internet will throw firms off balance.Just when many CEOs have written off the Web as last year’s news, early executableInternet apps will get attention as:

IT starts working on X intranets.The executable Internet will invade corporations the same way the Internet did:without IT’s permission. Despite most companies mandating Web-only internalapplications, some high-level executives will break their own rules and launchexecutable intranet functions. Why? Because once an enterprising VP discoversthat he can model his 401(k) investments faster using an executable Internet appfrom Schwab, he’ll see that the same technology can boost his division’sproductivity -- and he’ll allocate budget for Altio’s Designer tool to do that.

Corporate executable skills evolve toward open source.Java and XML are already two of the most in-demand skills for IT professionalsin corporations.15 But executable Internet applications will require similarly biginvestments in understanding user behavior and building graphical user interfaces(GUIs), something only firms like Microsoft, Apple, and Palm do today. Insteadof rolling their own, firms will tap into the open source movement and grab codefrom sites like Eazel.com and OpenOffice.org -- and slash their developmenttimes in the process.

Microsoft’s .Net promotes X Internet -- but delivers late.Bill Gates is selling corporations on intelligent Web services now, and Redmondalready owns the minds and tools of developers. So why won’t Microsoft dominatethe executable Internet? Because the firm has so many products in the pipelinetargeted at today’s Web, it will be 2003 before it has complete solutions for theX Internet -- putting the firm two years behind startups like Altio, Droplet, andFourbit that don’t have that distraction.

But the executable Internet is still PC-centric -- and the world only has about 450 millionPCs. The extended Internet will push applications to embedded chips and increase theInternet population by billions of nodes. The result? Today’s Internet devices and servicesmarket of $600 billion annually will grow to more than $2.7 trillion worldwide by 2010(see Figure 7). But in the process:

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The X InternetW H A T I T M E A N S

Figure 7 Forecast: Worldwide Internet Devices And Spending, 2001 To 2010

Cost per device will drop throughout the decade.Manufacturers, consumers, and service providers spend more than $4,000 per yearfor each computer on the Internet today. But with the X Internet’s opportunisticconnectivity and cheap devices, that number will drop to slightly less than $200 peryear in 2010. The X Internet market booms to 14 billion devices by 2010, but withthe unrelenting cost pressure on every device and connection, the boom will feellike a never-ending price war.

The X Internet will create an energy crisis for chips.With network interfaces embedded in everything from tires to clothing and billionsof devices being deployed, power consumption will continue to soar. Chip makerslike Intel and Motorola will get a new religion about power consumption -- andcompanies like IBM that have patents on low-power techniques like silicon-on-insulator will profit. Corporate users, on the other hand, will see power-savingprograms like Energy Star make a comeback as governments try to stem ever-rising national energy use by Internet devices.

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The X InternetW H A T I T M E A N S


Internet devices excluding theX Internet (millions)

Internet devices (millions)

Spend (US$ billions*)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Internet devicesexcluding the

X Internet (millions)139 191 247 306 372 443 518 592 664 729

Internet devices(millions) 140 193 253 329 470 870 2,188 5,177 9,472 14,266

Spend( US$ billions) $633 $629 $585 $533 $533 $691 $1,217 $2,015 $2,581 $2,721

Spend per node(US$) $4,531 $3,262 $2,316 $1,621 $1,135 $794 $556 $389 $273 $191

4,000

8,000

12,000

16,000

*1 billion = 1,000,000,000

0

$4,000

$8,000

$12,000

$16,000

0

Numberof

devices(millions)

R E L A T E D M A T E R I A L

Online Resource

The spreadsheet detailing the impact of the X Internet on the number of Internet-connected devices reported in Figure 7 is available online by clicking on the “Get Data”button above the figure.

The Forecast Model For The X Internet

Forrester created a simple model to forecast the annual products and services revenuefor the extended Internet. That model uses today’s Internet revenues from technologycompanies to create a “spend-per-device” metric. We then depreciate that metric over thenext 10 years and combine it with our forecast of number of Internet devices to create theforecast model.

Companies Interviewed For This Report

Related Research

March 2001 Forrester Report “Net-Native Apps Emerge”February 2001 Forrester Report “The Ubiquitous Internet”January 2001 Forrester Report “P2P’s Pervasive Future”December 2000 Forrester Report “Scenario Design”

Altio www.altio.comConsilient www.consilient.comDell Computer www.dell.comDroplet www.droplets.comEazel www.eazel.comEMC www.emc.comFourbit Groupwww.fourbit.comGM/OnStar www.onstar.comHewlett-Packard www.hp.com

Intel www.intel.comiVita www.ivita.comLOBBY7 www.lobby7.comMedtronic www.medtronic.comMicrosoft www.microsoft.comNetGratus www.netgratus.comNortel Networkswww.nortel.comSun Microsystems www.sun.com

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The X InternetR E L A T E D M A T E R I A L

G R A P E V I N E

Cleaning up with today’s extended Internet.Forrester recently discovered that MIT is way ahead of us in connecting the Internet to the real world. e-Vend.net, in which Maytag invests, has installed Internet-connectedwashing machines in one of MIT’s dormitories. It’s not as silly as one might think --students can check on the Web for available washing machines, and when someone’slaundry is done, the washing machine sends the student an email. Forrester knew thatInternet appliances would catch on eventually, but who ever thought that soft wearwould come from Downy instead of Microsoft?

……

Converting Internet-connected machines into disconnected appliances.Have you ever wondered what to do with those extremely expensive but hopelessly obsoleteservers in your data center? We came across a solution at http://home.planet.nl/~mourits/koelkast/ that helps firms recycle Silicon Graphics Indy Challenge servers and turn theminto -- refrigerators. Forrester thinks recycling like this is wonderful -- and nearly as elegantas turning swords into plowshares.

……

Ring . . . “Do you want to play a game?”Online gamers have been the vanguard users of the executable Internet to date withgames like WarBirds and EverQuest. But now video game giant Electronic Arts hasstarted demonstrating a new game called Majestic, which incorporates some extendedInternet concepts. While the game doesn’t wire up players with sensors, it does intrudeinto real-world life by calling players on the telephone, sending them faxes, andinteracting via instant messenger. Shades of the old movie “War Games” -- except thecharacters in this computer game, thankfully, don’t play with thermonuclear weapons.

……

Intel employs executable Internet tools to fight cancer.Intel recently held an event to enlist users’ PCs to fight cancer using peer-to-peersoftware from United Devices. The goal of this first effort is to analyze 250 millionchemical molecules for their cancer-fighting potentials. The science comes from theAmerican Cancer Society, Oxford University, and the National Foundation for CancerResearch. Forrester thinks this project is a great use of executable Internet technologies.Just promise us that these executables won’t put Blue Man Group ads touting Pentium4s on our PCs.

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The X InternetG R A P E V I N E

E N D N O T E S1 This number is a Forrester extrapolation based on the Internet Software Consortium’s January 2001 survey.

2 North America represents the bulk of this eCommerce boom today, but as Western Europe and AsiaPacific begin their eCommerce hypergrowth phases in 2001 and 2002, those two regions combined willexceed North America’s trade amount by 2004.

3 Worldwide Net commerce -- both B2B and B2C -- will hit $6.8 trillion in 2004. North Americarepresents a majority of this trade, but its dominance will fade, as some Asian-Pacific and WesternEuropean countries hit hypergrowth over the next two years.

4 This data comes from a study commissioned by Cisco and done by the University of Texas Center forResearch in Electronic Commerce and presented on January 12, 2001.

5 The Internet measurement data is from the Internet Software Consortium (isc.org). The number ofautomobiles is from the report “Global Vehicle Remarketing” by Adesa Corporation; the number of mobilephones worldwide is from a article in USA Today; and the number of chips was extrapolated from Intel’scount of 15 billion in 1999, published in “One Digital Day.” While these numbers are not authoritative, they accurately represent the scale of the different categories.

6 Over the past two years, Forrester has evaluated the user experience on more than 100 B2B and B2C Websites. Most failed. The shortcomings of these sites are because of both basic and advanced design flaws.

7 Forrester graded 30 B2B Web sites and found that every one failed basic tests of value, ease, andreliability. Major problems included missing content, meager function, and frequent errors.

8 Forrester commissioned Greenfield Online to conduct an online survey of 5,644 US consumers abouttheir Web content buying habits and expectations. Results showed that consumers believed online contentwas lower quality and were mostly unwilling to pay for it -- and for the content they were willing to payfor, they wouldn’t pay much.

9 This number is from the employment research firm Challenger, Gray & Christmas, as published in theFebruary 28, 2001 Upsidetoday article, “Online retailers continue decline.”

10 George F. Colony predicted the arrival of the X Internet in late 2000. The article is available online byclicking on “The Company” section of the Forrester Web site at www.forrester.com.

11 The growing quantity and range of eMarketplaces creates a crowded, confusing environment. But astrade via these venues takes off, participants will come to better understand their needs, driving ashakeout over the next three years that will affect dot-coms and industry consortia resulting in highlyspecialized online US markets.

12 To enhance their performance, leading chemical firms will attack product development inefficiencies,turning to a new strategy: adaptive development. In this environment, suppliers will tailor solutions toindividual customers by building interactive tools and plugging in outside specialists.

13 In 2000, Forrester estimated that 800,000 cars had safety and security telematics services installed;200,000 cars had entertainment telematics services installed; and 400,000 cars had navigation telematicsservices installed.

14 Scenario Design focuses a company’s technology, organization, and processes on helping its users achievetheir goals, regardless of which channel they use. But before it can do that, it must identify the users,examine the goals those users have, and then observe how users achieve those goals online.

15 This information was obtained from a Foote Partners survey of 17,000 IT, a summary of which was publishedon April 10, 2001 in eWeek at http://www.zdnet.com/eweek/stories/general/0,11011,2706525,00.html.

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The X InternetE N D N O T E S

Documents

The X Internet - Massachusetts Institute of Technology